First, I don't let PayPal (or anyone else) have access to my bank accounts. I learned this through experience from a few unpleasant experiences with PayPal. I pay using a credit card, so if a mistake is made or fraud attempted I can dispute the charge without being out-of-pocket for any money while it is being resolved. Plus I get rewards points, which helps offset any fees.
Second, I only send money as a gift to people I personally know and trust. Everyone else either accepts it as a payment for merchandise or takes a walk. I will consider adding the 3% PayPal fee to my purchase price if I think the deal is worth it.
Third, I do not see anything in PayPal's terms and conditions that say a money sent to a friend or family cannot be reversed. Fraud is not limited to strangers or transfers of merchandise. I would contact PayPal asking them to reverse the transaction and if they refused, file a claim with your credit card issuer or bank. Even if PayPal decides not to help, your issuer or bank will not ignore a claim of fraud.
Forth, agreeing to sell an item and accepting money but not delivering is fraud, and when the Internet is used to negotiate the sale and make payment, this becomes a federal crime of interstate wire fraud, prosecuted by the US Department of Justice and investigated by the FBI. I don't know what the thresholds are, if any, but if all else fails it doesn't take a lot of effort to make a phone appointment to discuss your case with your state's District Attorney's office. Even if they don't prosecute they might help you identify the real person behind the scam so you can consider other action.
Fifth and finally, post negative feedback identifying the scammer to help others avoid future problems.